Medtech 2026:
How the Medical Device Industry Actually Works

Part 1 · Chapter 01Preface: The Silent Trillion

Every conversation about “the future of healthcare” in 2026 seems to be about one of three things: GLP-1 drugs, generative AI in imaging, or the collapse of the primary-care model. None of them are the biggest story in the room.

The biggest story is that the world's medical device industry crossed roughly $572 billion in 2025 and is on track for around $605 billion in 2026, growing at 6.9% CAGR to over $1 trillion by 2034.^[1] That is roughly the size of the entire global semiconductor industry, or three times the box-office revenue of the entire film industry — and it grows every year, in every jurisdiction, without needing anyone's attention.

The top hundred companies in the industry collectively booked ~$487 billion in revenue and employ ~1.2 million people worldwide.^[3] That is a lot of headcount for an industry most people cannot name three companies in. Ask a well-informed generalist to list the biggest medtech firms and they will get to Medtronic, and then usually stop. In fact the top ten are:

You will notice something unusual about this list: it is boring. There are no hyper-scalers, no Magnificent Seven, and no household consumer brands. The top of the industry is a stable oligopoly of hundred-year-old European industrial groups (Siemens, Philips, B. Braun) sitting alongside American medical conglomerates (Medtronic, J&J, Stryker, BD) and the two supply-chain giants (Medline, Cardinal). The average founding year of the top ten is before 1900.

That is the first thing to internalise about medtech: it is an incumbent's game, and incumbency is the single most important variable in how the industry behaves. New entrants exist — Intuitive Surgical, Insulet, Dexcom, Shockwave — but they win by attacking one specific procedure with a decade of clinical evidence, not by disrupting an industry. When Johnson & Johnson wanted a category, they paid $13.1 billion for Shockwave rather than build one.^[5] When Abbott wanted molecular diagnostics they paid $21 billion for Exact Sciences.^[6] The pattern is old: the machine buys the startup.

My argument in the rest of the primer is that this pattern is about to change — not because the incumbents will lose, but because the rules of the game are changing underneath them. Three forces are worth calling out up front:

1. AI is arriving inside the device itself. The FDA has authorised over 1,450 AI/ML-enabled medical devices as of early 2026,^[7] with a 16.6% year-on-year growth in 2025 clearances (295 in 2025 vs. 253 in 2024).^[7] This is not a novelty anymore.
2. Procurement is being restructured. The NHS moved to Value-Based Procurement in June 2026, capping price at 40% of tender scoring;^[2] China's Volume-Based Procurement has cut coronary stent prices by 92.67% on average and is expanding into more device categories every quarter.^[8]
3. M&A has re-accelerated. Global medtech M&A crossed $80 billion in 2025 and is on pace for $80–100 billion in 2026, up from a trough of ~$39B in 2023.^[9]

The rest of Part 1 unpacks the machine that these forces are acting on. Part 2 tells you how to price it.

Part 1 · Chapter 02Fundamentals of Medtech Economics

What is a “medical device”?

The legal definition matters more than most founders realise, because it determines regulatory pathway, tax treatment, and reimbursement eligibility all at once. In the United States, the FDA defines a device as any “instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article” intended to diagnose, cure, mitigate, treat or prevent disease, and which does not achieve its primary intended purposes through chemical action. That last clause is what separates a device from a drug: a stent is a device even if it elutes a drug, because its mechanical action is primary; a molecular therapy is not a device even if it is delivered by a machine.

In the EU, the equivalent framework is Regulation (EU) 2017/745 — the Medical Device Regulation, or MDR — and its diagnostic sibling, IVDR (EU) 2017/746. Both took effect in the last five years and are, at the time of writing, the single largest compliance shock the industry has ever absorbed.^[10]

Devices are classified by risk. In the US:

The volume distribution here matters. Of the ~3,200 devices the FDA clears in a typical year, roughly 98.5% come through 510(k), and only 30–45 are original PMAs — the high-risk implantables that generate most of the industry's headline value.^[11] A 510(k) turns on demonstrating “substantial equivalence” to a predicate device already on the market; a PMA turns on standalone clinical evidence, typically from a randomised trial. This is why medtech capital is so unevenly distributed: a Class III cardiovascular device can cost $50–100 million and 5–7 years to bring to market;^[12] a Class II AI radiology triage tool can clear in 142 days.^[11]

The three revenue archetypes

Every medtech P&L is a mix of three business models:

1. Capital equipment.

Large one-time hardware sales: MRI scanners, surgical robots, cath-lab imaging suites, patient monitors. Order sizes run from tens of thousands to tens of millions of dollars. Sales cycles are long — 9–18 months is standard for a US hospital, longer in Europe, much longer in tender-driven markets. Gross margins on capital are usually 40–55%, and revenue is lumpy. Siemens Healthineers, GE HealthCare, and Philips are structurally capital-equipment businesses.

2. Consumables.

Disposable items used per-procedure: catheters, drapes, syringes, guidewires, staplers, contrast media. High-volume, low-ASP, but with beautiful economics once the product is in place because the customer is locked in by workflow. Gross margins are 55–70%. This is what BD, Cardinal, Medline and B. Braun mostly are. When people say “medtech is a boring industry with great margins”, they mean consumables.

3. Razor-and-blade.

A capital placement followed by a stream of consumables and/or service revenue. This is where the elite margins live. Intuitive Surgical is the textbook case: ∼$8.4 billion in 2024, ~$10.06 billion in 2025 (+21%), of which the recurring “instruments & accessories” line was $6.02 billion (60% of total).^[13] Every da Vinci system placed adds a decade of consumable revenue at 70%+ gross margin.

Elite vs. average medtech KPIs. Source: IB Interview Questions Healthcare IB Guide.^[14]

Why medtech is worth what it is

Public medtech multiples cluster in a narrow band because the underlying businesses look surprisingly similar once you strip them down. On a five-year view most large-cap devices firms trade at 18–25x forward EPS and 4–6x EV/Sales, driven by three variables analysts actually track:

1. Organic revenue growth. The single most important metric. Industry average is 5–6%; anything above 8% organic is exceptional.^[14] Below 3% and you are being valued as an industrial.
2. New-product revenue share. A healthy pipeline generates 20–30% of total revenue from products introduced in the last three years.^[14] This is the market's proxy for “can this company defend its franchise?”
3. Same-store utilisation growth. For razor-and-blade businesses, this tells you whether the installed base is deepening. Intuitive's Q4 2025 average da Vinci utilisation grew 4% year-on-year^[13] — that number alone is worth billions in market cap.

What analysts do not track well, and what practitioners obsess over, is the tender pipeline: the forward book of public procurement contracts a manufacturer has won or is bidding on. In markets like the UK, France, Germany, Italy, Spain, most of the Middle East, China and India, the tender pipeline is effectively 40–70% of revenue. We'll come back to that in Part 2.

Part 1 · Chapter 03The Shape of the Industry

The industry doesn't split evenly across body systems — it clusters heavily. Four segments account for well over half of global device revenue: in-vitro diagnostics (IVD), cardiovascular, medical imaging, and orthopaedics. IVD alone is around 18% of the whole industry, or roughly $78–108 billion in 2026 depending on scope.^[15]

In-vitro diagnostics: the quiet giant

If you have ever had a blood test, a Covid PCR, a pregnancy test, a HbA1c reading, or a companion-diagnostic assay before starting an oncology drug — you have been a customer of the IVD industry. It is the largest single medtech segment by revenue, and it is dominated by five companies: Roche Diagnostics, Abbott, Danaher (via Beckman Coulter and Cepheid), Siemens Healthineers, and Sysmex.

IVD economics are unusually good. A high-throughput lab analyser is a capital placement with a 7–10 year installed life; the reagents are proprietary consumables at 70%+ gross margin; and the underlying test volume compounds at 4–6% a year, driven by ageing populations and rising chronic-disease prevalence. Companion diagnostics — molecular tests that determine drug eligibility — are the highest-growth sub-segment, running at 10–13% CAGR against a base of roughly $10–11 billion.^[15]

This is what Abbott is buying in the $21B Exact Sciences deal:^[6] not the diagnostic itself, but the flywheel between an installed molecular platform, a curated content library, and a payer relationship that lets you run the same test on millions of patients a year with the drug companies paying for the eligibility check.

Cardiovascular: the highest-value sandbox

Every serious medtech executive has spent time in cardiovascular. It is the largest Class III device panel by a wide margin — 50.8% of the entire PMA database is cardiovascular^[11] — and cardiovascular is the top-ranked segment for FDA Breakthrough Device designations (~260 as of March 2026).^[11]

Where the money is right now: electrophysiology (particularly pulsed-field ablation for atrial fibrillation, growing 30%+ year-on-year), structural heart (transcatheter aortic and mitral valves), and peripheral vascular (thrombectomy for stroke and DVT). The market's structural growth is roughly 7–8% CAGR, driving the segment from ~$75B in 2025 toward $100B+ by 2030.^[16]

Medical imaging: the sleeping AI giant

The imaging market is worth roughly $50B globally and is structurally slow-growing (3–4% CAGR on hardware) — but it is where the AI revolution has landed hardest. 76% of all cumulative FDA-cleared AI/ML medical devices are in radiology.^[11] If you are looking for the segment where AI margins might get captured by software, this is it.

Orthopaedics: the ASC migration

Orthopaedics is a maturing market (~$50B) with a fascinating structural shift underneath it: the migration of high-margin joint replacements out of the hospital and into ambulatory surgery centres (ASCs). In the US, over 50% of primary knee and hip replacements are now done in an ASC, up from less than 10% five years ago. This changes everything about the sales cycle, the reimbursement code, and the device design (smaller instruments, less inventory footprint). Zimmer Biomet, Stryker, and Smith+Nephew are the three players to watch.

Part 1 · Chapter 04From Bench to Bedside

A drug goes through discovery, preclinical, three trial phases, submission, approval, launch. A medical device goes through:

1. Concept & feasibility. A clinical need is identified; usually by a practising physician-inventor or an engineering team embedded in a teaching hospital.
2. Prototype & bench testing. The device is built and tested against engineering specifications and biocompatibility standards (ISO 10993, ISO 13485).
3. Pre-clinical. Animal studies to establish safety. For Class II devices this is often minimal; for Class III implants it can be extensive.
4. Clinical evidence. Depends heavily on class:
   • Class II / 510(k): often no new clinical trial needed if a predicate exists.
   • Class II with De Novo: typically a small (100–300 patient) study.
   • Class III / PMA: a full pivotal trial, typically 500–1,000+ patients with 1–2 years follow-up.
5. Regulatory submission & clearance. The FDA / notified body review. This is where costs and timelines blow up if the trial hasn't been designed correctly.
6. Reimbursement & coding. A CPT/HCPCS or DRG code has to exist, or the device sells at cost. This is the step founders forget.
7. Commercial launch. Physician training, GPO contracting, tender submissions, KOL development, IDN account penetration. This is where most devices die commercially, not clinically.

Roland Berger's MedTech Winners Analysis puts a hard number on this: profitable medtech “winners” invest on average 8.5% of revenue in R&D versus 6.5% for underperformers.^[18] The two percentage points of R&D compound into materially different growth trajectories over a decade. Elite medtech runs at 10–15% R&D intensity; pharma runs at 20–25% and is starting to run out of returns.

Part 1 · Chapter 05Regulation: FDA, CE, and the Notified Body Bottleneck

The US machine

The FDA's Center for Devices and Radiological Health (CDRH) is the largest device regulator in the world, and it is remarkably transparent about its volumes. Every clearance is public and searchable. Here is the annual flow, from the FDA's own databases:

The 510(k) pathway is the industry's workhorse. Roughly 3,200 clearances a year, of which:

• Traditional 510(k): ~89% of submissions
• Special 510(k): ~9% (design changes to already-cleared devices)
• Abbreviated 510(k): ~2% (relying on recognised standards)

The industry's applicant geography is heavily concentrated: 83.5% of all historical 510(k) clearances have gone to US-based applicants, with China (3.2%), Germany (1.4%), Canada (1.3%) and South Korea (1.2%) making up most of the rest.^[11] This matters more than it looks: the FDA does not favour US applicants, but the regulatory infrastructure to file well is heavily concentrated in Boston, Minneapolis, and the San Francisco Bay Area.

The Breakthrough Devices Program

Since 2015 the FDA has run a fast-track programme for devices that treat life-threatening or irreversibly debilitating conditions. As of 31 March 2026 there had been 1,284 Breakthrough Device designations (CDRH 1,264 + CBER 20), of which only 198 (~15%) had received marketing authorisation.^[11]

This is a useful proxy for genuine innovation in the industry. The panel breakdown is revealing:

Neurology is quietly the most interesting number here. Two hundred designations in a decade for a category the industry barely had a real business in five years ago. Neuralink, Synchron, Motif, Precision Neuroscience — this is where the next Intuitive Surgical or Edwards Lifesciences is being incubated, if anywhere.

Europe: MDR, IVDR, and the notified body bottleneck

The European medical device regulation is called MDR (2017/745), and it is the biggest regulatory upheaval the industry has ever absorbed. It replaced the older Medical Device Directive with a more rigorous conformity-assessment regime that requires:

• New clinical evaluation reports for every device already on the market.
• Reclassification of many devices into higher risk classes.
• A more granular unique-device identification (UDI) system.
• Post-market surveillance and PMCF (post-market clinical follow-up) obligations for every registration.

The bottleneck is not the regulation itself — it is the notified body capacity. There are only about 50 designated notified bodies across the EU, and the transition has produced multi-year backlogs. On 4 May 2026, the European Commission adopted Implementing Regulation (EU) 2026/977 to harmonise notified-body practices further.^[10] This has real strategic consequences: hundreds of legacy devices have exited the European market rather than pay to recertify, and a genuine two-speed dynamic has emerged where US clearance now often precedes EU CE-marking by 12–24 months for the same product.

Part 1 · Chapter 06Reimbursement & HTA

A device that is cleared by the FDA but not paid for by insurers is a very expensive science project. This is where more founder-led medtech companies fail than at any other stage.

The three C's: coding, coverage, payment

In every major market, a device has to clear three separate gates to actually generate revenue:

1. Coding. Does a billing code exist for the procedure that uses the device? In the US, that means a CPT code (for physician work), an HCPCS code (for the device itself, if applicable), and — for inpatient care — a DRG.
2. Coverage. Does the payer (Medicare, Medicaid, or a commercial plan) consider the procedure “medically necessary” for the indicated population? This is typically decided via a National Coverage Determination or Local Coverage Determinations.
3. Payment. How much does the payer actually pay? For inpatient care, this is the DRG bundle. For outpatient, it is the APC (Ambulatory Payment Classification). For physician work, the RVU-based fee schedule.

How the DRG bundle actually works

US inpatient care is paid via a bundled DRG (Diagnosis-Related Group) — one payment per admission that is supposed to cover everything, including the device. A hospital that implants a $30,000 TAVR valve gets one DRG payment that is supposed to cover the valve, the cath-lab, the surgeon, the anaesthesia, and the recovery. If the payment is short of the true cost, the hospital either loses money or does fewer procedures. This is why the New Technology Add-on Payment (NTAP) mechanism exists: for genuinely novel technologies, CMS can add a supplemental payment for 2–3 years while the new cost is being absorbed into DRG weight recalculations.^[19] The outpatient equivalent is the Transitional Pass-Through Payment under the OPPS APC system.

These matter more than they sound. NTAP was designed to prevent a scenario where hospitals could not afford to adopt a new technology. Novel neurovascular thrombectomy devices, TAVR valves, and CAR-T therapies have all leaned on NTAP in their launch years. Founders should treat NTAP eligibility as a first-order launch variable.

Europe: HTA and the payer-appraisal machine

Europe does not have one system — it has 27 of them, plus the UK. But three national HTA agencies drive most of the pricing signal for the continent: NICE in the UK, HAS in France, and G-BA/IQWiG in Germany.^[20]

The pattern: HTA in Europe is more consequential for high-cost devices than for cheaper ones, but even a favourable HTA does not guarantee reimbursement — it only unlocks the ability to negotiate. Reimbursement itself is typically via a national DRG-equivalent (G-DRG in Germany, GHM in France, HRG in England) with add-on codes for high-cost implants.

China: the National Reimbursement Drug List and the VBP shock

China's National Healthcare Security Administration (NHSA) has, since 2019, run a policy called Volume-Based Procurement (VBP), or Ji Cai. The mechanism: the central government aggregates demand across most of the country, then runs a reverse-auction tender that awards contracts to the lowest bidders in exchange for guaranteed volumes.^[8] The impact has been extraordinary. In the first cardiac stent VBP round in 2020, the average selling price of a coronary drug-eluting stent fell by 92.67% — from roughly $1,500 to under $75.^[8]

VBP has since expanded to orthopaedic joints, intraocular lenses, dental implants, coronary balloons, electrophysiology catheters, and — as of 2026 — hip and shoulder prostheses. The message from Beijing is clear: for any device category with clinical parity across manufacturers, expect an 80–95% price reset within 36 months of the first VBP round. Multinationals have responded either by exiting categories (Medtronic's coronary business in China has been quietly downsized) or by moving to premium-only positioning (Abbott's TAVR platform in China is priced against the imaging suite, not the valve).

Part 1 · Chapter 07Case Study: The TAVR Franchise

Every generation of medtech has a signature franchise — a single procedure category that reshapes the industry's economics for a decade. For the 1990s it was coronary stents. For the 2000s it was drug-eluting stents. For the 2010s it was TAVR — transcatheter aortic valve replacement — and it is a masterclass in how the machine we've just described actually works when everything goes right.

Aortic stenosis is the narrowing of the aortic valve, a condition that historically was fatal within a few years of symptom onset unless treated with open-heart surgery. The problem was that many patients — often elderly, often with comorbidities — could not tolerate open-heart surgery. TAVR is a procedure that replaces the aortic valve via a catheter inserted through the femoral artery, without opening the chest.

The franchise has been built by two companies: Edwards Lifesciences (SAPIEN family) and Medtronic (CoreValve/Evolut family), with Abbott (Portico/Navitor) and Boston Scientific (Acurate) as second-tier challengers. Between them, the two leaders have taken TAVR from a $0 procedure category in 2011 to roughly $7 billion in global revenue in 2025.

Every stage of the primer above shows up in TAVR's history:

1. Regulatory pathway. Both franchises came through the PMA route with multi-thousand-patient pivotal trials (PARTNER, CoreValve US Pivotal).
2. Reimbursement. Both were launched with NTAP add-on payments in the US to bridge the DRG gap. This was the single most important factor enabling adoption in the first three launch years.
3. Coverage expansion. Each indication (high-risk → intermediate-risk → low-risk → asymptomatic) required its own pivotal trial and coverage determination. Each expansion doubled or tripled the addressable population.
4. Iterative device improvement. Every generation of both SAPIEN and Evolut has been a PMA supplement — 37.6 supplements per original PMA on average, industry-wide.^[11] This is why the FDA database has 55,213 supplement records against only 1,470 originals.
5. Global roll-out. Europe (via CE mark) actually cleared TAVR before the US; Japan required its own PMDA process; China now runs it through VBP with a domestic-manufacturer preference.

The TAVR franchise is what a well-run medtech category looks like: a very tightly indicated procedure, protected by clinical evidence, priced against the alternative (open surgery), reimbursed on a DRG bundle with add-on protection, and iterated over a decade into a mature installed base with a razor-and-blade tail. It is the model that everyone in structural heart, neurovascular, and pulsed-field ablation is now trying to replicate.

Part 2 · Chapter 08The Buyers: Hospitals, GPOs, Tenders

If you want to understand how a device is actually priced, you have to understand who is actually buying it. And in every major market, the answer is not “the hospital”. It is a layered stack of buying entities, each with its own economics, incentives, and negotiating power.

The US: GPO oligopoly

Three group purchasing organisations aggregate the vast majority of US non-federal hospital purchasing:

Vizient (the largest, ~468,000 beds, ~29% of US hospital beds), Premier Inc (~4,400 hospitals and 225,000 non-acute providers, $65B in annual GPO volume), and HealthTrust (~1,800 hospitals, part of HCA).^[21] A fourth, more specialised layer includes Vizient's Sg2, Intalere/Provista, and a handful of regional GPOs.

Here is what most people don't understand about GPOs: they don't buy anything. They negotiate the right to buy on behalf of their member hospitals, then charge the manufacturer an administrative fee (typically 2–3% of contracted spend) for access to those hospitals. Individual hospitals still write the actual purchase orders. But a manufacturer that is not on a GPO contract is functionally locked out of that GPO's member hospitals for the duration of the contract — usually 3 years.

This has three consequences worth internalising:

1. GPO contracting is the single most important commercial event in the life of a US medtech product. Losing a Vizient re-bid can wipe 20% off your top line overnight.
2. Committee-driven decisions are slow and evidence-heavy. A Vizient sourcing decision typically involves clinical review, financial review, supply-chain review, and often a physician-led product evaluation. Deals are won on months of preparation, not on quarter-end pushes.
3. Category exclusivity is contentious. Sole-source and dual-source contracts vary by category. Cardiovascular implants tend to remain multi-source (physician-preference dominates); commodity consumables tend toward sole-source.

Europe & ROW: national tenders

Outside the US, most large hospital systems are public. That means the buying is done by national or regional procurement authorities — the NHS in the UK, GHU/CHU groups in France, KBV/AOK in Germany, Consip in Italy, and their equivalents across the Middle East, Latin America and Asia.

The mechanism they all use, more or less, is MEAT — Most Economically Advantageous Tender, enshrined in EU Public Procurement Directive 2014/24/EU. MEAT allows procurement authorities to score bidders on a weighted combination of price and non-price criteria. In practice this is a 30–70% weighting on price, with the balance on quality, service, delivery, and — increasingly — sustainability and social value.

This is not a rounding error. It is a structural change to how the UK's £30-billion-a-year medtech procurement machine is going to work for the next decade — and every other European system is watching. The winning bidder is no longer the one with the sharpest pencil. It is the one that can prove clinical outcomes, service reliability, environmental credentials, and supply-chain resilience on top of a competitive price.

The tender pipeline as an asset

If you are inside a large medtech commercial team, or you are underwriting one from a PE seat, the single most valuable piece of data in the whole organisation is the tender pipeline: the forward book of national and regional public procurement contracts open, closing, or scheduled to be re-tendered in the next 24 months. In many geographies this pipeline is public information, published in Tenders Electronic Daily (TED) for the EU, Contracts Finder for the UK, SAM.gov for the US federal government, and equivalent portals for every OECD market. But those aggregators are only the tip of the iceberg. Beneath them sits an extraordinary long tail: the European Commission and independent trackers count over 2,000 separate procurement portals across the EU^[24] operated by roughly 250,000 contracting authorities^[25] — federal, state, regional, and municipal. Germany's ~1,900 hospitals each run their own purchasing, with no single national portal;^[26] Spain's health system is split across 17 autonomous communities publishing on 20+ portals;^[27] Italy layers Consip, 20 regional agencies, and hundreds of local ASLs and AOs. The US is even more fragmented: 6,500+ US hospitals maintain their own RFP portals, vendor-registration systems, and supply-chain pages,^[28] on top of GPO bulletins and IDN e-commerce platforms. The problem is not availability of data — it is that it lives across hundreds of thousands of PDFs in dozens of languages, with no standard taxonomy, no common structure, and no linkage to product SKUs. This is the exact problem the tender-intelligence category — platforms such as Vamstar — was built to solve.

Part 2 · Chapter 09The Pricing Stack

There is no such thing as “the price” of a medical device. Every device has at least five reference prices at any given time:

1. List price / MSRP. The published number. Almost nobody pays it. Exists mostly for tax and regulatory purposes.
2. GPO contract price. The negotiated price that GPO members can access. This is what US hospitals actually see on their POs.
3. Local negotiated price. The bilateral price a specific IDN or hospital has negotiated on top of the GPO baseline, often with volume-tier discounts or bundle rebates.
4. Tender-clearing price. The price at which the device won its last national tender in each geography. This is the “marginal price” that everyone in the market watches.
5. Reference price / benchmark price. Countries that use international reference pricing (the Netherlands, France for some device categories, Germany for some IVDs) legally cap domestic prices at a percentile of prices in a reference basket of countries.

The tender-clearing price is the marginal price

The most important thing to understand about medtech pricing is that the tender-clearing price is the marginal price. Every subsequent negotiation — GPO renewals, bilateral IDN deals, private-hospital contracts — anchors against the last tender-clearing price for the same product category in a comparable market.

This is the medtech equivalent of the “marginal cost sets the market price” principle from power markets. In medtech, the last device needed to fill a national tender is priced at the level of the lowest bidder that met the technical specification — and every other buyer in the country prices against that.

Under a NHS-style 60/40 scoring matrix, a supplier that is 15% higher than the low-price bidder can still win the tender if their value-domain score is materially better. This is not theory — it is why Medtronic and Philips have been able to hold price on premium categories in Europe while local competitors race to the bottom on commodity segments.

Why medtech prices are so opaque

Three reasons, in order of importance:

1. Contract confidentiality. Most GPO and hospital contracts have non-disclosure clauses. Even the discount schedule is often proprietary.
2. Bundled pricing. Capital equipment is routinely priced with consumable minimums, service contracts, financing terms, and training bundled in. Backing out the “unit price” requires unpicking the whole bundle.
3. Multi-year rebate structures. A device can list at $100 and clear at $70 after volume rebates that only crystalise at the end of a 3-year contract. On any given day, nobody knows the real price.

The opacity is closing, slowly. Every EU tender is legally required to publish the awarded price and volume (though not always the SKU). CMS in the US now publishes hospital chargemaster data, and — since the Hospital Price Transparency Rule — negotiated payer rates. Tender-intelligence players aggregate this data into workable benchmarks. But the industry remains, on balance, the most price-opaque large sector in the OECD after defence and pharmaceuticals.

Part 2 · Chapter 10Regional Markets: US · EU · China · UK · Japan

United States (~45% of global medtech revenue)

The world's largest single market, and the one every serious medtech company is built around. US hospitals pay substantially more per unit for the same device than any other market — a coronary drug-eluting stent that clears at $1,000–1,500 in the US clears at $75 in China post-VBP. The reasons: private insurance, commercial payer diversity, procedure-based reimbursement, and a physician-preference culture in complex specialties.

What this market rewards: clinical differentiation, KOL relationships, GPO contracting execution, and specialty sales infrastructure. What it punishes: pure price competition. If your only advantage is that you are cheaper, do not enter the US.

European Union + UK (~25% of global medtech revenue)

A single regulatory framework (MDR/IVDR + CE mark) sitting on top of 28 fundamentally different national reimbursement systems. Germany and France together make up over half the EU-27 device spend. The UK, post-Brexit, is now on its own UKCA marking track (though CE marks continue to be accepted through 2028) and its VBP framework is likely to become the reference for the rest of Europe.

What this market rewards: value-based positioning, sustainability credentials, and tender execution. What it punishes: US-style premium pricing without the outcomes evidence to back it.

China (~15% of global medtech revenue)

The second-largest market in the world, and the one that has been most fundamentally reshaped in the last five years. Volume-Based Procurement has driven price cuts of 60–95% across cardiac stents, orthopaedic joints, IOLs, and — increasingly — electrophysiology catheters, coronary balloons, and dental implants. In parallel, China's domestic manufacturers (Mindray, MicroPort, Shanghai United Imaging, Weigao) have moved up the value curve fast, capturing significant share in imaging, patient monitoring, and orthopaedics.

What this market rewards: premium positioning above the VBP threshold, local manufacturing partnerships, and clinical evidence in the Chinese population. What it punishes: reliance on IP protection and Western commercial models.

Japan (~7% of global medtech revenue)

A structurally slow-growing but stable market, characterised by strong reimbursement (the Chuikyo Central Social Insurance Medical Council reviews device prices every two years), highly conservative clinical adoption, and dominant local players in imaging (Fujifilm, Canon Medical, Konica Minolta) and endoscopy (Olympus is effectively a monopolist). Foreign entry is possible but expensive.

Rest of the World (~8%)

Emerging markets — India, Brazil, Middle East, Southeast Asia — are collectively the fastest-growing region at 8–12% CAGR but from a small base. India's structure is now dominated by AIIMS-driven and state-tender procurement; the Middle East is dominated by GCC-wide unified tenders (Saudi's NUPCO, UAE's Rafed) that can move hundreds of millions of dollars in a single award.

Part 2 · Chapter 11The AI Wave in Medtech

The FDA has authorised approximately 1,451 AI/ML-enabled medical devices as of early 2026, with clearances now running at 295 per year (2025) and accelerating.^[11] Roughly 94–95% come through 510(k) rather than De Novo, meaning most of them are substantially equivalent to a predicate device rather than genuinely novel technology.^[11]

The composition matters as much as the count. A landmark Nature Digital Medicine analysis of 1,016 authorisations classified every AI device by data type, clinical function, and AI function:^[22]

The most common AI function is quantification and feature localisation (65% of analysis devices), followed by triage (12.9%) and diagnosis (7.2%).^[22] Predictive AI — the class that would flag patients at future risk before symptoms — remains only 1.7%. And there is no evidence in the FDA's cleared list of any large-language-model-based device, though clearly one is imminent.

Why 76% of AI clearances are in radiology

Radiology is the natural first landing zone for medical AI because of three structural features:

1. Standardised data. DICOM has been the universal medical imaging format for 30 years. There is no equivalent in cardiology signals, pathology slides, or clinical notes.
2. Retrospective validation. An imaging AI can be trained and validated on historical scans without prospective clinical trials — meeting FDA 510(k) predicate requirements is comparatively straightforward.
3. Radiologist economics. A single radiologist reads 50–100 studies a day; efficiency gains have obvious workflow value.

The next 76% of AI clearances will be somewhere else — likely a combination of cardiology (ECG interpretation, echo automation), pathology (digital slide analysis), continuous monitoring (patch and wearable-based deterioration detection), and surgical AI (real-time video analysis during minimally invasive procedures). But each of these faces the reimbursement problem.

The reimbursement gap

The single biggest bottleneck for medtech AI is not clearance — it is payment. As of 2026, there are still very few US CPT codes that reimburse an AI-driven interpretation separately from the underlying study. Some category-defining codes exist:

• CPT 92229 — automated point-of-care diabetic retinopathy screening (used by IDx-DR and equivalents)
• CPT 93241–93244 — long-term continuous ECG monitoring with AI interpretation (Zio, iRhythm)
• CPT 76377/76376 — 3D rendering with concurrent physician supervision, extended to some AI-assisted workflows

The problem: there are ~1,450 cleared AI devices and roughly 20 CPT codes that meaningfully reimburse AI-specific work. Until the code base catches up, most FDA-cleared medical AI generates its revenue from software licensing to imaging vendors or subscription contracts to health systems — not from procedural reimbursement. This is going to change over the next 3–5 years, and when it does, the economics of the entire imaging AI category will inflect.

Surgical robotics: the second AI wave

Meanwhile the other AI story in medtech is happening in the operating theatre. For twenty years, surgical robotics has been effectively a monopoly: Intuitive Surgical's da Vinci system, with ~65% of global robotic surgery revenue and over 11,000 systems installed by 2025.^[23] In 2025, Intuitive placed 1,721 da Vinci systems, of which 870 were the newest-generation da Vinci 5 — and total revenue crossed $10 billion for the first time, growing 21% year-on-year.^[13]

But by mid-2026 the monopoly has cracked open. Medtronic's Hugo RAS platform has FDA clearance in urology and is expanding indications; Johnson & Johnson's long-awaited Ottava platform has entered clinical study; Stryker's Mako robotic arm is now the standard of care in US knee replacement (over 50% of hospital robotic knee cases); CMR Surgical's Versius is scaling in Europe and Asia. AI is the entry ticket in this next generation — every new platform includes real-time video AI, autonomous suturing sub-routines, and pre-operative planning integrations that would have been science fiction five years ago.

Part 2 · Chapter 12Deal Flow: M&A and Capital

Medtech M&A operates on a slower cycle than the rest of tech — it correlates more with interest rates than with sector sentiment. The 2023 trough (~$39B) came directly out of the rate shock; 2024 rebounded to $68B; 2025 finished over $80B; and 2026 has started with two of the largest cardiovascular deals in the industry's history (Boston Scientific–Penumbra at $14.5B and Danaher–Masimo at $9.9B).^[9]

The 2025 landscape

Source: MedDeviceGuide 2025–2026 tracker.^[9]

What the strategics are actually buying

Three themes explain almost every deal above $500M:

1. Diagnostics platforms with recurring revenue. Abbott–Exact, BD–Waters, Danaher–Masimo, Thermo Fisher–Solventum, Blackstone/TPG–Hologic. The theme: buy an installed instrument platform with a consumables tail.
2. Cardiovascular intervention. Boston Scientific–Penumbra (neurovascular thrombectomy), Stryker–Inari (peripheral thrombectomy), Medtronic–CathWorks (physiology-guided coronary), Medtronic–Scientia (neurovascular access), Teleflex–Biotronik (vascular). Every major cardiac franchise is being reinforced.
3. Portfolio simplification. Medtronic's spin of its diabetes business into MiniMed. J&J's ongoing medtech separation. BD's Life Sciences carve-out to Waters. These are less about growth and more about margin discipline.

The venture layer

Medtech VC has held up remarkably well. Between July 2024 and June 2025, medtech venture-capital investment was $8.7 billion, up 20% year-on-year — even as total funding rounds fell 47% to 237.^[9] That is a market concentrating on larger, later-stage bets in fewer companies. It looks a lot like what happened in enterprise SaaS in 2020: capital consolidation into the survivors.

Part 2 · Chapter 13Where the Value Is Heading

The primer has been descriptive to this point. This chapter is a strategic read of the market — six categories where the structural fundamentals of demand, reimbursement and procurement are aligning, and six where they are working against incumbents faster than most commercial plans acknowledge. This is not investment advice and not a view on any specific company; it is a horizon scan of the sector, over a 3–7 year window, shaped by the tender-award data flowing through the industry every day.

Categories with structural tailwinds

1. Pulsed-field ablation (PFA). The single fastest-growing sub-segment in cardiovascular, with multiple cleared platforms now in adoption ramp. PFA is displacing radiofrequency ablation for atrial fibrillation — a market of $6–8B — on a safer and faster procedure profile. Structurally analogous to the early TAVR ramp.
2. Peripheral vascular thrombectomy. Stroke and DVT remain massively under-treated globally. Procedure volumes in vascular thrombectomy have been growing at 50–60% year-on-year at leading platforms,^[9] and reimbursement coverage is catching up.
3. High-throughput molecular IVD in emerging markets. Automated PCR and syndromic testing platforms are being placed into GCC, Southeast Asia, and African health systems at accelerating pace. The consumable tail is 15+ year revenue once the installed base lands.
4. Continuous glucose monitoring and metabolic monitoring. A category that is now flowing over from diabetes into pre-diabetes and general metabolic health. GLP-1 uptake is a compounding tailwind for monitoring adherence and effect, not a substitute.
5. Value-based-procurement-ready manufacturers. Manufacturers that already publish carbon-reduction plans, ISO 13485:2016 certification, Scope 1 & 2 emissions data, and full lifecycle costing will win an outsize share of European tenders under VBP.^[2] The rest will lose share, slowly, for a decade.
6. Tender-intelligence infrastructure. The information asymmetry between manufacturers who can see the global tender pipeline and those who can't has never been wider. The winners in the next commercial cycle will run their commercial teams on tender data the way SaaS companies ran on Salesforce data in the 2010s.

Categories with structural risk

1. Commodity cardiac stents in any VBP-eligible market. China's clearing price collapsed 92.67% under VBP; India's and Southeast Asia's are on the same trajectory. Undifferentiated portfolios in this category will not defend margin.
2. Standalone imaging AI without a distribution partner. Roughly 1,100 radiology AI clearances are chasing perhaps 20 workable CPT codes. Value accrues to workflows integrated into major imaging workstations and PACS incumbents, not to standalone algorithms.
3. Consumer wearables re-branded as medical devices. Excellent consumer franchises — but very few have solved the reimbursement problem for their medical-grade features, and the regulatory pathway alone is a five-year timeline most consumer teams underestimate.
4. Capital equipment sales into pure fee-for-service US oncology practices. Reimbursement dynamics under the Inflation Reduction Act have compressed the site-of-service economics. This category is now contracting.
5. European MDR under-preparation. If a competitor has cleared CE mark under MDR and a manufacturer has not, catching up cheaply is not a realistic plan. The notified body queue is real.^[10]
6. Pure-medtech companies without a regulatory or reimbursement moat. Since 2022 the US IPO window has been effectively closed for medtech. When it re-opens it will re-open for franchises with genuine regulatory, clinical and reimbursement defensibility — not for category-adjacent stories.

Part 2 · Chapter 14Closing

Medtech is not a glamorous industry. It has none of the flywheel dynamics of software, none of the winner-take-all economics of consumer internet, and none of the moonshot upside of biotech. What it has, instead, is durability: a hundred years of compounding, a stable set of physical goods that the world's healthcare systems cannot function without, and an installed base that no software business will ever match for switching costs.

The next decade will be the most interesting one the industry has seen since the invention of the drug-eluting stent. Three shifts are converging:

1. AI is moving from the periphery of the device into the device itself — reshaping radiology first, then cardiology, then surgery, then diagnostics.
2. Procurement is being restructured at national scale, from the NHS's Value-Based Procurement to China's Volume-Based Procurement, in ways that will punish the manufacturers who cannot articulate their value beyond price.
3. The capital cycle has re-accelerated, with strategic M&A hitting a decade-high pace and PE stepping in on the largest take-privates the industry has ever seen.

The question I would leave you with is the same one I ask my own team every quarter: if the price of every device in your portfolio dropped 40% over the next five years, would your business still be worth what it is today? If the answer is yes — because you have a razor-and-blade franchise, or a genuine outcomes moat, or a regulated data platform — then medtech in 2026 is a wonderful place to be operating and investing. If the answer is no, the value-based procurement wave is going to find you.

Good luck. And when you next pass a hospital, remember that most of what happens inside it is medtech — and that most of medtech is quietly, boringly, brilliantly built.

— Praful Mehta, August 2026